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The EU Doesn’t Need A Green New Deal

When Ursula von der Leyen made her EU President pitch to the European Parliament last month, she made her environmental plan a top priority. Now, von der Leyen is due to take the helm as President of the union in November, and she will have 100 days to start putting her plan into action.

Dubbed the European Green New Deal, the plan, according to Forbes Brussels reporter Dave Keating, envisages a carbon-neutral EU by 2050, with emissions cut in half by 2030. The price tag of the plan: US$1.1 trillion.

Now, compared with Bernie Sanders’ climate change plan and its cost of US$16.3 trillion, the new EU President’s green new deal is modest in terms of costs. However, the eurozone economies are still struggling to return to steady growth after the 2008 crisis and the chances of that happening anytime soon remain remote, with Germany, the pillar of the zone’s economy, slipping into negative territory during the second quarter of the year.

Since this eurozone is where the most money for the EU comes from, the success of von der Leyen’s environmental plan is far from guaranteed even if she manages to beat the U.S. Democrats to implementing one. And then there is another question that Keating addresses in his analysis: does the EU need a green new deal at all?

Proponents are adamant that it does. Leading by example is one argument for it, if it could be called an argument at all. Leading by example is a great strategy in parenting but when it comes to economies, concrete interests would prevail every single time. In other words, if it’s uneconomical for China and India to follow Europe’s example—and it is—they won’t do it, however bright and shiny the example-setter.

According to proponents, however, a green new deal and the EU’s decarbonization would be good for the economy. Simone Tagliapietra, an author for Bruegel, a Brussels-based think tank, writes that “It is good for Europe because deep decarbonisation represents a historical occasion to modernise its economy, revitalise its industry and ensure long-term growth and jobs.”

Indeed, decarbonisation efforts are already changing industries, but the positive effects from this, economically speaking, have yet to make their presence known. In the meantime, these decarbonisation efforts might pit the business world against politicians.

Here’s one part of von der Leyen’s plan as detailed by Forbes’ Keating:

“One of the plan’s proposals outlined by von der Leyen, to introduce a border tax aimed at preventing carbon leakage from one country to another. This refers to the prospect of carbon-intensive industries leaving the EU to avoid regulation, moving to the rest of the world where they can continue to pollute. But this will encounter fierce resistance from free traders, especially within her own conservative European political family.”

While the economic benefits of decarbonisation remain elusive, however, the benefits for the environment are clear: the EU currently accounts for less than a tenth of global emissions and by 2030 this could fall to 5 percent. In other words, what the EU is doing at the moment is already working and, it seems, it is working without harming the economy too much.

Keating also notes that while the new EU President’s climate plan would reduce emissions by as much as 1.5 billion tons by 2030, emissions in other parts of the world will continue to grow. Figures for last year suggest that EU’s emissions are now close to 2014 levels, but emissions in China, for example, are rising, as are emissions in India and the United States.

The idea of leading by example is certainly a noble one. However, as is the case with many noble ideas, the practicality is questionable. There is no way to cut emissions sharply without hurting economies that are already highly vulnerable to all sorts of shocks. There is also absolutely no certainty that the leading-by-example approach would have the expected effects. In fact, chances are it will not. So, the EU may get a green new deal before the U.S., but the question whether it needs one or not remains open.